The dollar is keeping resilient as another push higher in USD/JPY is sparking flows into the currency today. The pair looks poised to march towards 135.00 and is up almost 120 pips today to 113.75 at the moment. The mood is helped by a rise in bond yields, with 10-year Treasury yield seen up 4 bps to 3.01%.
Elsewhere, the greenback is also posting modest gains with the sluggish risk mood seeing the aussie and kiwi punished the most.
EUR/USD is down 0.2% to 1.0675 as the push and pull continues ahead of the ECB. Meanwhile, GBP/USD as backed off the highs near 1.2600 to fall towards 1.2520 levels at the moment. The daily support levels below will be ones to watch:

That being the 38.2 Fib retracement level at 1.2471 and the 1 June low at 1.2458. Those are key levels to watch on the daily close to see if sellers have the appetite to go chasing for the next leg lower.
Besides that, AUD/USD is down another 0.6% to 0.7180 upon a rejection of its 100-day moving average:

Sellers are wrestling back for near-term control below the 200-hour moving average at 0.7194 but the minor support region around 0.7145-60 will be one to watch to see if the downside momentum will extend further.The more sluggish tones in the aussie and kiwi aren’t helped by the softer risk mood with European indices posting slight losses now with US futures also still pointing lower. S&P 500 futures are down 0.3% still at the moment.

Prior 58.2

That’s the softest reading since January as the weakest rise in residential work for two years holds back construction activity last month. Companies mentioned that rising borrowing costs and heightened economic uncertainty were all likely to act as headwinds to client demand in the next 12 months. S&P Global notes that:
„May data signalled a solid overall rise in UK construction output as resilience across the commercial and civil engineering segments helped to offset weakness in house building. Residential construction activity was close to stagnation in May, which represented its worst performance for two years amid signs of softer demand and a headwind from low consumer confidence.
„New order volumes expanded at the slowest pace since the end of 2021, which added to signs that heightened economic uncertainty has started to impact client spending. Concerns about the business outlook were signalled by a fall in construction sector growth projections to the lowest for more than one-and-a-half years in May. Around 19% of construction firms predict an outright decline in business activity during the year ahead, up from just 5% at the start of 2022.
„On a more positive note, supplier delays subsided in May, with the latest downturn in performance the least marked since February 2020. Meanwhile, rapid price pressures persisted due to rising energy, fuel and staff costs, but the overall rate of inflation eased to a threemonth low in May.“

Headlines:RBA raises cash rate by 50 bps to 0.85%A couple of early reactions to the RBA rate hike todayAussie gains after the RBA does not disappoint the hawksPoof.. Just like that and the aussie gains evaporateUSD/JPY continues ascend to fresh highs in two decadesGermany April factory orders -2.7% vs +0.3% m/m expectedEurozone June Sentix investor confidence -15.8 vs -20.0 expectedMarkets:USD leads, NZD lags on the dayEuropean equities lower; S&P 500 futures down 0.8%US 10-year yields down 1.3 bps to 3.025%Gold up 0.4% to $1,848.13WTI crude down 0.4% to $118.04Bitcoin down 6.2% to $29,494The day started off with the RBA pulling off yet another unorthodox rate hike, this time by raising the cash rate by 50 bps to 0.85% – against market expectations of either a 25 bps or 40 bps move.The aussie got a jolt higher from 0.7185 to 0.7245 on the decision as bonds continue to get slammed with yields moving higher. While yields did come off a bit as risk sentiment remains iffy, the aussie saw its gains vanish completely – and quickly for that matter.The more defensive risk tones are continuing to underpin the dollar but also the continued push higher in USD/JPY is helping with general flows, as the pair seeks to extend its technical breakout from the start of the week.The high today reached 132.99 and price action continues to hold close to the highs, with the dollar also seen gaining elsewhere across the board.EUR/USD is down 0.3% to 1.0668 while GBP/USD had a bit of a seesaw session, falling from 1.2500 to 1.2430 before climbing back to 1.2530 and then falling back to 1.2480-90 levels after running into familiar resistance.As risk is keeping on the softer side, the kiwi is the main laggard with NZD/USD slipping from 0.6490 to 0.6435 during the session with the high point coming right after the RBA rate decision.

Here’s a look at how the equities space is doing:Eurostoxx -1.1%Germany DAX -1.1%France CAC 40 -1.0%UK FTSE -0.2%S&P 500 futures -0.9%Nasdaq futures -1.1%Dow futures -0.7%That’s a bit of a retreat from the opening levels earlier in the day here. The bond selling is also hitting the pause button for now, with 10-year Treasury yields seen down to 3.02% from around 3.05% at the start of the session.But the dollar is still holding its ground with EUR/USD down slightly to 1.0670 near the lows for the day, while GBP/USD is down 0.3% to 1.2490 after a bounce from 1.2430 to 1.2530 as pointed out here. USD/JPY continues to stay perky and is up 0.7% to 132.80, staying in the hunt of a potential push towards 135.00 in the bigger picture.Meanwhile, AUD/USD is down slightly to 0.7180 after its post-RBA rally was faded quickly – falling from a high of 0.7245.

Wants to refrain from commenting on FX levelsJust the typical light jawboning by Japanese officials. The yen is still keeping on the softer side after the break to fresh highs in over two decades this week. USD/JPY is up 0.6% to 132.70 at the moment, after having briefly closed in on the 133.00 handle earlier in the day.

The pair dropped to a low of 1.2430 earlier as the dollar also firmed across the board, with USD/JPY came close to touching 133.00 for a brief period. But since then, the greenback has seen gains ease up as Treasury yields slip back a little and USD/JPY also coming down from 132.99 to 132.69 at the moment.In turn, cable has produced a notable bounce from 1.2430 to 1.2533 in the past hour. The bounce is being stalled by familiar resistance from the 100-hour moving average (red line) at 1.2531 currently. The 200-hour moving average (blue line) will add to another layer of defense for sellers, seen at 1.2573 – as evident in the past few sessions.There is a slight improvement in risk tones even if equities are keeping lower across the board. S&P 500 futures have trimmed losses from 0.6% to be down 0.3% now, with Nasdaq futures also seen down 0.4% from around 0.8% earlier. European indices are still lower across the board, with losses ranging around 0.4% to 0.7% mostly.But the greenback’s firmness is being contested as bond yields pull back a little on the session. 10-year Treasury yields are now down 1.7 bps to 3.02% after being just above 3.05% earlier in the day.Going back to cable, it is tough to see much momentum for a break higher as long as risk tones remain sluggish and the dollar is steadying itself over the past few sessions. The defense of the key hourly moving averages only serves to reaffirm that sellers are in near-term control at the moment – going by the technical perspective at least.Looking at the fundamentals, the Fed also remains more hawkish than the BOE and the UK’s economic struggle will be a real test of resolve for Bailey & co. in the months ahead – even with surging inflation.

Prior -22.6

Euro area investor morale rose more than expected – the first increase since the Russia-Ukraine conflict – but the dour economic tone continues to reverberate for the time being amid supply issues and inflation. The current conditions index was seen at -7.3 in June, a slight improvement from the -10.5 reading in May.
Sentix notes that:
„As impressive as the improvement in the situation and expectations values may appear at first glance, this is unlikely to mark a turnaround. While consumers are already suffering from rising prices, many companies have been able to pass on their sharply rising costs to their customers and benefited from people rushing to buy goods and services before price increases. However, this phase looks set to finish as end consumers will have to cut back at some point, and monetary policy could become more restrictive from July.“

Primer: UK PM Johnson no-confidence vote at 18:00-20:00BST/13:00-15:00EDT today – Link Courtesy of my friends at NewsquawkOverviewUK PM Johnson is expected to survive the no-confidence vote, according to current betting odds, which gives him a 12-month pass from being subject to such proceedings again.
However, surviving the vote is not always enough; previous PMs, including Johnson’s predecessor, were out of office shortly after such a vote, despite attracting the support of a Conservative majority.
To recap, at least 54 Conservative MPs had to write to the 1922 Chair for a vote to take place. To remove Johnson, a majority of 180 Tory MPs is required from a secret ballot.
Voting on the ballot occurs between 18:00-20:00BST/13:00-15:00EDT today, votes will be immediately counted though the announcement time is TBC; but likely within an hour or so of voting concluding.
Majority in favour of Johnson

If Johnson secures the support of 180/359 or more Conservative MPs then he will remain as PM and is exempt from being subject to a formal no-confidence vote for a one-year period.
Note, it is theoretically possible for the 1922 Committee to change this rule, though the mechanics/feasibility of them doing so is unclear.However, precedent shows that PMs who survive confidence votes are sometimes irreparably weakened. With Johnson’s predecessor May, a prime example. Additionally, the divisions generated within the party – even though voting is via a secret ballot – can substantially complicate the intra-party politics, to the detriment of the existing cabinet/government.
As a side note, recent reports indicated that Johnson was mulling a cabinet reshuffle, following the May local elections, with indications that it would occur prior to the July 21st recess.
Majority against Johnson/he resigns

If Johnson does not secure the support of 180 or more Tory MPs, then he is no longer able to remain as leader of the party and by extension PM.
At this point, Johnson would essentially serve as a caretaker until a replacement is determined.
A process which commences with candidates putting their name(s) forwards, and requiring the backing of eight MPs to do so. Assuming there are more than two candidates, sequential rounds of voting occur with 5% of the party (18 MPs) initially needed to move forward, then 10% and so on.
Generally, during this stage, candidates will tactically drop out and give their endorsement to ‘rivals’ in exchange for a high-ranking Cabinet position, or similar.
Once the field whittles down to two candidates, an eventual winner is then determined by a postal ballot of all Conservative party members. A winner that then leads the Tory party and, by extension, becomes UK PM.
Note, any replacement would not be required to call a snap general election to cement their position, though they may be placed under pressure to do so; the next scheduled election is before December 2024.

The guys at Newsquawk, with the always awesome US Market OpenFull note: US Market Open: Risk-on with fresh catalysts thin and focused on APAC developments and UK politics

6
Things You Need to Know

 

European bourses are
bolstered in limited newsflow as participants recoup from post-NFP pressure
amid multiple China-related developments

US futures in-fitting with this performance and aided by the
incremental China COVID developments alongside a pick-up in the regions PMIs

GBP is bid, but off highs, going into the no-confidence vote for
PM Johnson between 18:00-20:00BST/13:00-15:00ET today

DXY downbeat as such, to the broad benefit of peers, but still
holding above a cluster of recent lows

Core debt is pressured, with Bund downside lifting EUR, though
BTPs outperform on FT source reports while the US curve flattens incrementally

Crude is contained with gains of circa. USD 1.00/bbl, caught between
Saudi lifting OSPs, El Sharara’s partial resumption and above China-related
factors

Worth flagging the odds on Boris Johnson still being PM when the Tory Party Conference starts (2nd of October) have increased since news of the Vote of No Confidence broke.

– Was 1.90s this AM, now 1.5s choice.A classic of the ‚Buy the rumour – Sell the fact‘ genre. 

I wonder how much of the £650k matched in this is Brady (the only fella that really knows what’s going on Re the vote etc)